Amazon recently held a huge “Prime Day” sale. The sale will run for two days and feature a variety of products at various discounts. And while I was looking through some of the offers available, I remembered something. post From co-blogger John Murphy a year ago.
In this post, he examines the FTC’s case against Amazon as a monopoly. One of his points is that the FTC is getting the key points exactly the other way around. What they thought was evidence of monopolistic behavior on Amazon’s part was actually evidence of intense competition. Regarding Nessie, the price adjustment algorithm used by Amazon, he points out:
First, Nessie’s purpose was to compare Amazon’s price increases To other retailers. Therefore, the existence of the project indicates that Amazon was facing serious problems. competition In the e-commerce market. It was a competition they had to watch and adapt to. Second, the fact that Nessie was programmed to reduce Prices returning to previous levels when other competitors do not raise prices shows that Amazon is a price taker, not a price setter. They must follow market prices. They cannot raise prices as they wish. Amazon’s actions are not those of a monopoly However, competitive companies. Nessie’s existence is actually proof that Amazon faces a competitive e-commerce industry.
What does this have to do with the recent Amazon Prime Day sale? Now, one of the items I was interested in was certain wireless headphones. Amazon has cut the price to less than half the regular retail price. And when I saw that, I immediately knew, without even having to check, that the Best Buy and Target around the corner from where I live were probably discounting those items to the same extent. Understood. Retail markets (such as e-commerce) are competitive, so retailers set prices rather than set prices.
As John Murphy pointed out, people who care about price cannot raise prices. competition We keep our prices low. And the flip side of that is that if your competitors lower the price of their products, you have to do the same. So I decided to buy some headphones, but I bought them from Best Buy instead of Amazon. That way I didn’t have to wait 2 days for the item to arrive. (First world problems, I know!)
I’ve seen this done in other markets as well. Steam is a popular platform for digitally distributing PC games. Steam sometimes has big sales going on for several days. (There’s an ongoing joke in the PC gaming subculture that sales like this leave some people with a ton of games they bought but haven’t gotten around to playing yet. (Maybe that’s saying a lot!) When these Steam sales start, Microsoft suddenly has a huge sale on digital downloads of Xbox games on the digital market. Sony is doing something similar with digital downloads for the PlayStation system. If one service lowers its prices, all services must lower their prices. Although gaming is dominated by just a few large companies, the market is still highly competitive.
This also explains a phenomenon that I’ve noticed over the years, and I’m sure you, dear reader, have noticed as well. The holiday shopping season is much longer than it used to be. I remember when “Black Friday” was actually a one-day event that took place on the Friday after Thanksgiving. But then some retailers launched Black Friday weekendextended to Saturday and Sunday, and it became the norm. Many retailers now begin their “holiday shopping sales” well before Thanksgiving and continue until Christmas. When one retailer decides to expand their offerings, other retailers must expand as well.
I take all this as a good sign. Let’s say you love video games, but you play them mostly on your PlayStation. Even in this case, whenever Steam decides to offer PC game deals for PC gamers, you can profit from the competition and get PlayStation games at lower prices. Even if you’re not a customer of the PC gaming market, you can still benefit from its competition. Even if you don’t like ordering products online and prefer to shop in person, you can still get your products at your preferred brick-and-mortar retailer whenever Amazon lowers prices for its customers. Take a moment to understand this as you head into this holiday shopping season. And don’t forget. gift is good!
